Legacy planning is a lifelong endeavor that requires patience, discipline, a strong work ethic, and proficiency when it comes to money and taxes. Being “rich” should not only be defined in numerical terms. If not, what is the use of having a lot of money for people who cannot enjoy it, because they do not enjoy good physical or mental health?
For example, we have all heard of famous athletes who, despite having earned millions of dollars playing professional sports, end up bankrupt. A host of problems may have led to your financial ruin: marital infidelity resulting in divorce, hefty alimony settlements, financial illiteracy, out-of-control spending, poor investment decisions, being scammed by unscrupulous business managers, etc.
Therefore, being “rich” has to involve more than having millions of dollars. Have you ever heard of a person who won the lottery, only to have nothing to show for it a few years after winning? According to a 2006 report published by the Camelot Group, 44 percent of lottery winners spend all of their winnings within five years. For wealth to last and leave a legacy for the next generation, consumers must have a sustainable plan to ensure longevity. of health.
As for the African-American community, one important area where we need to improve to strengthen our ability to create and maintain wealth is becoming financially literate.
Why Financial Education?
A major differentiating factor between those who understand how money works and how to make money work for them has a lot to do with learning to read and write on the subject of money and personal finance. According to the 2009 Consumer Financial Literacy Survey, “54 percent of African Americans, significantly more than their white counterparts, strongly agree that they could use answers to everyday financial questions from a professional.” This survey also found that “African-American adults were less likely than Caucasian adults to have learned personal finance information in school.”
The wealth disparity between black and white households has a lot to do with education. Many African-Americans who are investing today, whether through their company-sponsored 401k, an IRA/ROTH IRA, or in a regular taxable brokerage account, are first-generation investors. Fortunately, due to the Internet and online trading resources like “E-Trade” and “TDAmeritrade,” African-Americans are now more likely to explore opening a brokerage account and buying stocks and mutual funds.
However, the problem of financial education has much to do with the lack of Black financial advisors representing financial services institutions across the United States. While I commend the progress some companies have made in recruiting African Americans to become financial advisors, there is still a long way to go before there is an adequate level of Black financial professionals to serve the financial education needs of African Americans. African Americans.
At many large brokerage firms, the percentage of African-Americans who are employed as financial advisors is around 2 percent or less! Given the abysmally low percentages of African-American financial advisors in the United States, should we be surprised by the wealth disparity between black and white Americans? Based on economic survey data taken from 2,000 American families who were interviewed every three years between 1984 and 2007, researchers found that the wealth disparity between black and white households has more than quadrupled regardless of income levels. , according to a recent study by the Institute on Assets and Social Policy (IASP) at Brandeis University.
In 1984, the average white family in the sample group had about $20,000 more in assets than the average black family. By 2007, the “racial wealth gap” had increased by $75,000. However, based on the most recent data, the average white family had about $630,000 in wealth, compared to just $98,000 for African-American families and $110,000 for Latino families. In fact, before the recession caused by a lack of regulatory and financial oversight on Capitol Hill and Wall Street, white families on average were about four times wealthier than nonwhite families, according to analysis of data from the Federal Reserve of the United States. Urban Institute. By 2010, white Americans were six times richer than African Americans.
Financial education will also strengthen the ability of many blacks to recover from the devastation caused by the Great Recession. Recovery isn’t simply a matter of seeing the value of your 401(K) reach its pre-recession level. If you don’t learn how to properly diversify your portfolio (whether your portfolio is made up of real estate or stocks, bonds, and mutual funds) in a way that it will last through the next financial crisis, you will inevitably repeat history in terms of the value of your investments.
African-Americans should put as much emphasis on becoming financially literate as we do on getting a four-year college education! If financial education continues to elude the Black community, getting a quality four-year college education will be out of reach for many of us, due to the rising cost of attending college. The present and future financial sustainability of a strong black middle class depends on African Americans becoming more financially literate today so that tomorrow the African American community has a fighting chance to close the widening wealth gap that has always existed among whites. . and blacks in America, which have unfortunately become even larger in this post-recession era.
A quote that represents my business philosophy as a wealth management advisor and personal finance educator is taken from a man whose material and spiritual wealth has been spoken of for centuries. His name was King Solomon. He said: “How much better it is to acquire wisdom than gold! And to acquire intelligence is to be chosen instead of silver!” (Proverbs 16:16)